Discount rate cut that will drive up GP indemnity costs was 'legal error'

The government 'erred legally' in deciding to cut the discount rate on personal injury payouts and should delay implementing the change, a medico-legal organisation has warned.

Soaring GP indemnity costs are set for a further spike following a decision by Lord Chancellor Liz Truss last month to lower significantly the discount rate on personal injury payouts.

Medico-legal experts have said the impact of the changes could be 'devastating', with rising fees already turning GPs away from the profession.

But medico-legal organisation the MDDUS has received legal advice that Ms Truss ‘erred legally in both the process and substance of her decision-making’, and has called on her to delay implementation of the new discount rate.

GP indemnity

The Lord Chancellor announced plans to slash the rate from 2.5% to -0.75% in February, with the change set to come into effect next week on 20 March.

Announcing the decision to cut the rate, Ms Truss, who is also the justice secretary, said: ‘The law is absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set.’ The discount rate is used to adjust large lump sum payouts for any future interest or investments a patient may make on the sum.

Speaking on Wednesday in a House of Commons debate on soaring GP indemnity costs, health minister David Mowat said that the government was seeking ways to ensure GPs would not have to pay higher indemnity costs as a result of changes to the discount rate. He also pledged that GPs would be protected against rising indemnity costs beyond the two-year existing indemnity support scheme for 2016/17 and 2017/18.

The minister admitted that the discount rate cut would have ‘a significant impact on all insurers in the private and public sectors’, but would be particularly devastating for the health sector.

The NHS’ reserve budget of £59bn – money it has set aside to cover potential central litigation costs – was increased by £5.9bn (10%) following the change to cover the expected rise in pay-outs.

NHS funding

MDDUS chief executive Chris Kenny said: ‘In a classic failure of joined-up government that looks set to make the problem worse, rather than better, doctors and dentists may now face a share of the £6bn bill for the NHS between now and 2022 caused by the Lord Chancellor’s recent astonishing decision to reduce the discount rate used in personal injury claims from 2.5% to -0.75%.

‘That will drive up the size and number of claims and associated legal bills – and mean more of them will be painfully fought over in court rather than resolved amicably.

‘MDDUS is honouring our pledge to explore all necessary action to protect our members. We are challenging the Lord Chancellor to stay implementation while she shows her reasoning in greater detail, as advice from leading counsel suggests she has erred legally in both the process and substance of her decision-making.

‘We do not discount further action once we have studied her response.’

Other medico-legal organisations are also looking closely at the impact of  the discount rate change.

Simon Kayll, CEO at Medical Protection, said: ‘Government support for GPs to manage the additional costs resulting from the court discount rate change is critical. Without sufficient support this increase in costs will need to be reflected in GP membership subscription rates, and we know this will be very troubling news for our members.’

Dr Matthew Lee, Medical Defence Union professional services director, said: ‘The reduction in the discount rate has made an already grave situation much worse and something must be done to protect GPs from the impact of this government decision and effectively address on-going claims inflation. We are campaigning for legal reform for fair compensation.’

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